European Central Bank Casts Wary Eye Toward Bitcoin

An anonymous reader writes "Erik Voorhees blogs for bitinstant.com: 'On Oct 29, 2012, the European Central Bank (ECB) released an official (and very nicely prepared) report called "Virtual Currency Schemes (PDF)." The 55-page report looks at several facets of what virtual currencies are, how they're being used, and what they can do. As it happens, the term "Bitcoin" appears 183 times. In fact, roughly a quarter of the whole report is specifically dedicated to Bitcoin and it's probably a safe assumption that Bitcoin's growth over the past year was the catalyst for producing this study in the first place. The report from the ECB concludes, in part: Virtual currencies fall within central banks' responsibility due to their characteristics, and Virtual currencies could have a "negative impact on the reputation of central banks."' Could this be the first step toward regulation of the digital currency?"

Re:Einen moment, bitte.

[Sir_Sri]

Well the central authority is built into how it was designed in the first place. You don't need a persistent authority because the core monetary rules of the currency exist from its inception and are unchangeable.

This is of course one of the two fatal flaws of bit coins - like gold - you severely limit the flexibility of the currency to cope with a crisis. And secondly, alternate currencies are essentially a mechanism to dodge tax (including barter), they have other advantages and disadvantages*, but you can use them to dodge tax, which means governments are going to clamp down on it, as it undermines the basis of a functioning society when people are legally dodging large amounts of tax.

And yes, much of this is like regulating the chips in a casino.

*Those advantages and disadvantages matter a lot of course. The primary benefit of Bitcoins is anonymity, which can be accomplished other ways with regular currency (cash..). But that could potentially be a serious drawback if it can be used to circumvent sanctions for example.

Re:Cast in a negative light, obviously

[Twinbee]

I was referring to the Broken window fallacy [wikipedia.org], which could completely remove unemployment, if vandals decided to cooperate. The amount of time and effort wasted with banks and their red tape is pretty similar to that.